For nearly two decades, CapGrow Partners has provided safe, secure and appropriate residential solutions for individuals with behavioral health needs. That makes it one of the most experienced real estate investors in the behavioral health space.
Now, the company has taken the next step in its journey by recapitalizing into a non-traded REIT vehicle. For CapGrow, the recapitalization offers an opportunity for the company to expand its investment focus, and extend leasing services to a broader pool of behavioral health providers beyond just the I/DD and traumatic brain injury (TBI) community.
For behavioral health providers, specifically those outside of I/DD and TBI, CapGrow’s move allows them to tap into the company’s long-term capital, strategic insight and more than 18 years of industry experience. The transition also provides an opportunity for providers to streamline their path to real estate by avoiding the need to work with financing partners that lack agility and creativity. Providers can, in sort, get the physical spaces they need to continue doing what they do best: provide care.
“This is not only a commitment to our partners, but also a commitment to the broader behavioral health provider community that they can continue to serve their clients without having to worry about the real estate procurement,” says founder and CEO Matt Pettinelli.
CapGrow Partners: a true pioneer
Demand for behavioral health services is on the rise — and M&A activity in the space is, too. Data from M&A advisory firm Mertz Taggart shows the total number of transactions in behavioral health has risen in each of the past three years: from 100 transactions in 2019 to 111 in 2020, 162 in 2021 and 177 in 2022.
This is the type of landscape that Pettinelli anticipated when he founded CapGrow in 2005 on the belief that providers should focus their time and monetary resources on operational needs, not real estate acquisitions. The company is a pioneer in focusing exclusively on fulfilling the real estate needs of behavioral health providers on a national platform.
From CapGrow’s earliest days, providers found its partnership-centric model very attractive. That led to significant growth, starting with CapGrow’s first transaction at the end of 2006. In 2015, CapGrow entered into a joint venture with a global institutional equity investor, which enabled the company to further expand its real estate leasing services. This partnership took the next step in further expanding CapGrow’s services through the recapitalization to the non-traded REIT platform.
In essence, CapGrow can bring to the behavioral health provider community access to its capital resources and strategic insights through a vehicle that is focused more on the long-term, rather than positioning itself for a sale.
Since inception, CapGrow has owned and leased more than 1,400 assets in the behavioral health community. Today, CapGrow is proud to own assets across 39 states with about 40 partners. CapGrow’s 18 years of experience provides the behavioral health provider community access to an unparalleled combination of deal-making experience and industry knowledge.
“With the recapitalization to a non-traded REIT, neither our current nor future partners will have to deal with firms that are inflexible or limited with the deployment of capital,” Pettinelli says. “We not only have a ton more flexibility than our competitors, we remain fully committed to being both location and check size agnostic.”
How providers benefit from CapGrow’s transition to a non-traded REIT
Because of CapGrow’s forward-thinking approach, institutional know-how and robust access to capital, Pettinelli always knew that the company could continue to do much more for behavioral health providers. The recapitalization has provided an opportunity for CapGrow to expand its investment focus, which, in return, allows for new doors to be opened.
“In the beginning, we predominantly targeted the I/DD and TBI provider networks. This was simply where the greatest demand resided,” Pettinelli says. “However, today we’re branching more aggressively into the broader behavioral health continuum due to the significant uptick in demand. Recapitalizing to a non-traded REIT platform allows us to maintain our continued source of capital while securing our investment to our partners for the long-term.”
For CapGrow’s providers, the best is yet to come
Although CapGrow has achieved notable success and won many awards related to their significant growth, the best years are yet to come, Pettinelli says. The entire team has welcomed the transition with open arms and is incredibly excited to expand their partnership-centric approach to a broader provider base.
“We are extremely excited for the future,” Pettinelli says. “We have developed very strong partnerships with many of the nation’s leading providers, and look forward to expanding our partnership-centric model to the broader behavioral health provider network.”
Jack Silverstein
jsilverstein@agingmedia.com